Uncomfortable Truths About Association Management

Michael LoBue writes: In the two recent comparing organizations based on their management models — AMC-managed vs. standalone — a number of uncomfortable truths emerged. The discomfort appears to be with some standalone organizations.

The second of these two studies completed last month, compared deficit operations over 2006, 2007 and 2008 was mentioned in the April 2010 issue of Association Trends magazine. The reference to the study was based on complaints from an unspecified number of standalone organizations because I sent letters to selected officers of those organizations sharing the results and suggesting that they might want to consider the AMC model.

Contrary to how the study was characterized in Association Trends, the study was conducted solely to learn more about the differences between these two management models and whether or not measurable results can be attributed to the management models. The study was not conducted nor commissioned by the AMC Institute. It was conceived and undertaken solely by my firm. The decision to use the results to reach out to standalone organizations came after discovering some important findings.

To clarify:

  • I did send letters directly to board leaders from a majority of the standalone organizations in the study that experienced deficits in 2008; and
  • I did not send letters to the executive directors of these organizations, but some did receive the letters, apparently from disgruntled board members.

Here are the comments printed in Association Trends:

  • “Several executives claimed their board members we ‘steamed’ that elected leaders’ names were so readily available on the 990s and that someone would have the ‘audacity to contact me directly’ rather than going through the association.”
  • “One CEO said, ‘If an AMC owner contacted me to offer help, knowing I was struggling, we might have worked something out that was mutually beneficial. But going around me to my board, $*&^%@)#!'”
  • “Another targeted executive agreed that he might use an AMC for project work and consider recommending the AMC form of management as an option but, ‘the guy who sent these letters is off my list forever!'”

This direct mail campaign will probably not go down as one of the better marketing programs we’re tried as a firm. It was not our intent to annoy or stress these organizational leaders any more than the economy may have already done. On the other hand, these reactions may validate something worth noting — that the findings in the studies, which sadly were not mentioned in the Association Trends’ article, are revealing some uncomfortable truths about how AMC-managed organizations enjoy benefits over standalone organizations. These benefits include:

  • Higher net profitability ratios;
  • Higher operating efficiency ratios;
  • Lower operating risk ratios;
  • More diverse revenue profiles;
  • Higher percentages of revenue spent on meetings, trade shows and educational activities for their members;
  • A third less paid, on average, for staffing, occupancy and capital resources; and
  • Less likely, by a wide margin, to have experienced deficit operations during the recession.

Contrary to the very personal reaction that our letter campaign may have generated in some recipients, it was not a personal or professional attack on anyone. The data from these two studies speaks to the management models, not the executives involved. The results suggest that even under the stewardship of extremely competent management, the standalone model has limitations overcome by the AMC-model.

It might surprise some of those board members and executives to learn that I not only sit on two nonprofit governing boards today, but I have been serving on at least one board for most of the past 25 years. Indeed, it is out of this deep experience as a fiduciary that I spent hundreds of hours on these two studies. We all need to improve our decision-making; we need to make more decisions based on evidence. Our organizations are too important to ignore any edge we can gain.

It would be a shame if leaders of standalone organizations dismissed the findings in these studies merely because it might contain some uncomfortable truths. Yes, AMCs stand to gain if these studies contain truths, but that’s an irrelevant fact. All that should matter to the leaders of standalone organizations is whether or not these studies contain useful findings. Findings that help them make better decisions for their members — regardless the management model.

Summary of Operating Ratio Study of AMC-Managed & Standalone Organizations (Aug 2009) click here…
Summary of April 2010 Study of Deficits and Surpluses
click here…

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